Easing airlines' pension woes gains favor

Does the collapse of United Airlines' pensions into a federal agency's arms mean federal relief is more likely for other airlines with similar problems?

That is clearly the case to U.S. Sen. Johnny Isakson (R-Ga.), the sponsor of legislation to ease troubled airlines' pension burdens.

"This just points out the reality of what the aviation industry is confronted with," said Isakson, commenting Wednesday on a federal bankruptcy judge's decision to let the Pension Benefit Guaranty Corp. pick up United's pensions.

The judge on Tuesday in Chicago cleared the way for United to abandon nearly $10 billion in unfunded liabilities, marking the largest pension default in the nation's history. The pension agency would pick up $6.6 billion of the total, wiping out the rest of the payments due workers.

Along with another Georgia congressman, Isakson is backing a law that would allow troubled airlines to make up their pension shortfalls over 25 years. Under current law, troubled companies can be required to begin covering their pension shortfalls within five years.

In the wake of the United pensions' takeover, Pension Benefit Guaranty Corp. officials say they are considering the merits of a proposal like Isakson's.

"One argument you hear frequently is that there will be intense competition from other airlines to follow suit. We share that concern," said Randy Clerihue, a spokesman for the agency. "We are open to proposals that would keep unfunded liabilities off of the PBGC's books."

But, Clerihue added, agency officials are concerned that such a proposal "would simply dig the hole deeper," by allowing troubled airlines to fall further behind in pension responsibilities.

Giving such a lengthy extension to an entire group of companies would be unprecedented in the agency's history.

Pension underfunding in the airline industry has loomed as a major problem for the agency as its liabilities have soared in recent years. Last year the 30-year-old agency saw a record deficit, $23.3 billion.

By agency estimates, the pension underfunding for about a dozen airlines is close to $20 billion.

As an industry, however, airlines rank second to automakers, whose pension underfunding is about $45 billion, agency officials said.

To help airline and steel companies with their pension problems, Congress two years ago passed legislation allowing them to reduce their payments to the pension agency for two years. But that relief expires this year, agency officials noted.

Isakson's proposal has gained strong support from the Air Line Pilots Association.

"We are going to make the argument to everyone that this is a bill that should be passed," said Pete Janhunen, a spokesman for the group.

But the Association of Professional Flight Attendants, which represents about 23,000 American Airlines attendants, has challenged the proposal, saying it would create an edge for airlines whose funding problems are more severe than American's.

Instead, the union supports extending the payments for only up to 10 years.

"We don't want to see the government mandating an unfair advantage for some airlines," said Liz Mallon, the union's Chicago-area chairwoman.

For the Association of Flight Attendants, which represents United's attendants,Isakson's proposal does not have much significance.

When the bankruptcy court handed United's pensions over to the pension agency, that removed the last airline that the union represents with a traditional pension plan, said Shane Larson, its legislative director.

The 25 other airlines represented by the union have converted their pensions or did not have traditional ones like United, Larson explained.